Introduction
The majority of the time, individuals confuse organizational structure and organizational culture and climate. On the one hand, the former defines how activities, including task allocation, supervision, and coordination, are guided toward accomplishing organizational aims. It impacts organizational action and offers the basis on which standard operating processes and routines rest. It determines which people get to participate in which decision-making procedures and, therefore, to what level their perceptions shape the actions of the stakeholders.
On the other hand, organizational culture and climate refer to common values, shared norms, attitudes, and views that impact how individuals in an organization conduct themselves. A firm’s priorities, staff motivation, and leadership commitments reflect its culture and climate. For new programs and practices, a company’s culture and climate may influence how people accept and support change. Through reviewing the case study of Zappos, it becomes clear that the management is facing the problem of resistance to change from employees. This has led to many leaving work and choosing to be paid severance. The management needs to communicate to the workforce the benefits of the new proposed organizational structure and employ it gradually.
Background
Tony Hsieh, a Chief Executive Officer at Zappos, has aimed to ensure that the company maintains the spirit of a startup by allowing self-management. He introduced a concept called Holacracy, which can be described as a complete, packaged system for self-management in firms (Golden et al., 2017). By doing this, he targeted to achieve the removal of the traditional management hierarchy. It is not the first time Hsieh’s actions have tried to be against normal. Despite having a net worth of above $500m, he chooses to live in a trailer (Golden et al., 2017). The most important issue in the case study is that he aims to increase transparency, agility, and accountability in his new organizational structure.
However, instead of checking the benefits, a section of employees view this as a wrong plan and resist the change. Simultaneously, the company is losing its workforce, which might be hard to replace if the numbers rise (Golden et al., 2017). Under the system, they all have roles, which can be several and defined around the work (Golden et al., 2017). The traditional form of governing in firms is discouraged, and rather transparent rules are set to ensure that every employee understands precisely what others are doing.
Hsieh implemented the ideology to prevent the formation of a bureaucratic system emerging from the expansion happening at Zappos. Bureaucracy is a body of non-elected governing officials and administrative policy-making groups (Meier, 2019). Historically, it was a government administration managed by departments staffed with non-elected individuals (Golden et al., 2017). Nowadays, the administrative system leads a large organization, either privately or publicly owned (Golden et al., 2017). One disadvantage of this is that rules and regulations are usually rigid and inflexible, discouraging creativity and initiative. Critics of the concept of Holacracy claim that it fails to consider people’s emotions, and thus, it is an inefficient system (Golden et al., 2017). Additionally, rigid meeting formats guide when and how a participant can speak during a gathering.
Despite the pros that Hsieh envisioned, not every stakeholder supported his ideology. On the 15th of March, 2015, he sent an email to employees, reaffirming that Zappos had committed to Holacracy (Golden et al., 2017). In the message, he demanded that the recipients decide before the 30th of that month if they desired to continue working at Zappos (Golden et al., 2017). If they chose to leave, they would get a severance package. By the deadline, 18% accepted the severance offer, and 11% left the firm for other reasons early in the year (Golden et al., 2017). Eventually, 29% of the workforce left their jobs at Zappos in 2015 alone (Golden et al., 2017). This proves that few people understood or enjoyed how the company was run.
Hsieh desired to achieve a new organizational structure that was not normal and establish values that every member of the Zappos workforce would share. When implemented, holacracy erases a corporate hierarchy and enables employees to reach important decisions within their area of authority (Golden et al., 2017). It aims to replace traditional command structures’ rigidity with flexible roles (Golden et al., 2017). Rather than a conventional pyramid-shaped structure, a holacracy is defined as a sequence of nested circles, each depicting autonomous teams with different tasks (Golden et al., 2017). Instead of having fixed job responsibilities, people functioning in such settings may occupy numerous positions. Since each person has several jobs, the CEO can take a leadership role on a single team and a subordinate on another (Golden et al., 2017). Any disputes arising are resolved in periodic governance meetings within a circle (Golden et al., 2017). Companies that practice this ideology have empowered the lead roles to reach important decisions without needing to submit to the management chain of command.
Evaluation of the Case
The new concept of holacracy, which Hsieh committed to introducing at Zappos, failed. Introducing a new organizational structure is a problem as it faces resistance from employees, who are accustomed to certain values, order, and climate, that would be ruined (Golden et al., 2017). Some have already chosen to leave work and be paid a severance package. If the issue persists, it may result in more staff members quitting their jobs (Golden et al., 2017). Finding new talent is not easy, especially when considering talent and experience in the field. The company would need to spend financially, which might lead to losses. An established organizational structure is important and might be the main reason behind the company losing many employees in 2015 (Golden et al., 2017). Employees must understand that there are clear lines of operation and that a system guides all these. It becomes harder for one employee to receive orders from another on their level. This ultimately promises chaos, which affects productivity and revenue (Golden et al., 2017). For many years, workers at the firm had become accustomed to certain values that helped create the organizational culture and climate. By attempting to change the organization structure, the CEO was implementing something that would also disrupt the culture and climate. This resulted in about one-third of a company’s workforce choosing to leave (Schell & Bischof, 2022). It is critical for the survival and development of any firm for leaders to consult with employees before the implementation of new methods of governance.
Recommended Solutions/Changes
For successful implementation, it is important to consider playing by the rules. The leader should ensure they do not rewrite the rules before even trying them. This suggests that the management focuses on understanding how the concept has been implemented in other situations, its impact, and how resistance to change from key stakeholders was handled. Secondly, Hsieh must aim for the support of leadership (Schell & Bischof, 2022). It will be harder for employees to adopt a new organizational structure if the top management shows signs of resistance. The CEO can explain the benefits of the proposed system to the leaders and remind them that their support would be greatly appreciated.
One must set expectations or goals that are realistic to the employees. The concept of holacracy is not a panacea, as Schell and Bischof (2022) suggested. Thus, the CEO should implement the change with achievable assumptions and objectives. Any organizational system can set boundaries and offer individuals guidance in their work. However, holacracy depends on trustworthy team members to work correctly (Schell & Bischof, 2022). If the organization has poor actors on its payroll, the ideology will not be able to fix that situation (Schell & Bischof, 2022). Lastly, they should start slow and build a consensus around the matter. Checking Zappos’ organizational structure, one can find that its holacracy implementation strategy was abrupt.
Pariveda did not approach the issue in the same manner. The company has been gradually adopting Holacracy for about four years, and there is no regret. Slower is better since the changes involved are great (Schell & Bischof, 2022). It is essential to begin with the most receptive areas of the organization, discovering the benefits and hardships, talking openly about both, and ensuring people are fully engaged. It might appear that one is splintering their team by disseminating authority. However, there is still a need for a team to effect positive holacratic change.
Conclusion
An organizational structure is needed for any company regardless of sector. In the case study, Hsieh presented a new system that aims to eliminate the issue of traditional hierarchies. However, he is facing the problem of resistance to change, which is seen through the number who chose to quit their jobs. It would be proper for any manager in his position to consider seeking support from the board of directors or the top management. Additionally, he could ensure that he understands how the approach has worked in other situations and how challenges were handled. This is realistic as it would give the CEO a plan for administering the novel structure.
References
Golden, B., Pandey, A., & O’Rourke, J. (2017). Zappos: An Experiment in Holacracy. Web.
Meier, K. J. (2019). Theoretical frontiers in representative bureaucracy: New directions for research. Perspectives on Public Management and Governance, 2(1), 39–56. Web.
Schell, S., & Bischof, N. (2022). Change the way of working. Ways into self‐organization with the use of Holacracy: An empirical investigation. European Management Review, 19(1), 123-137. Web.
